|
NET TRADING
Surf... select... & click
Related Article
Recommendations of the Sebi Committee on e-trading
Sebi-registered stock brokers will have to apply to stock exchanges for a formal permission. Brokers should fulfil the following minimum conditions:
Networth requirement : a minimum net worth of Rs 50 lakh
Operational integrity: The stock exchange should ensure that the system used by the broker has provision for security, reliability and confidentiality of data through use of encryption technology. (Basic minimum security standards, viz. User id, first and second level password, automatic expiry of passwords at the end of a reasonable duration, secured socket level security for server access through Internet, suitable firewalls between the trading set-up directly connected to an exchange trading system and the Internet trading set-up, microprocessor-based Smart cards, dynamic password, 64 bit/128- bit encryption).
System capacity: The stock exchange must ensure that brokers maintain adequate back-up systems and data storage capacity.
Qualified personnel: The stock exchange must lay down the minimum qualification for personnel to ensure that the broker has suitably qualified and adequate personnel to handle communication including trading instructions.
Written procedures: The stock exchange must develop uniform written procedures to handle contingency situations and for review of incoming and outgoing electronic correspondence.
Signature verification/authentication: It is desirable that participants use authentication technologies. For this purpose it should be mandatory for participants to use certification agencies as and when notified by the government / Sebi.
Client-Broker Relationship
Know your client: The stock exchange must ensure that brokers have sufficient verifiable information about clients, which will facilitate risk evaluation of clients.
Broker-client agreement: Brokers must enter into an agreement with clients spelling out all the obligations and rights. This agreement should also include, inter alia, the minimum service standards to be maintained by the broker for such services specified by Sebi/exchanges for Internet-based trading from time to time.
Investor information: The broker’s web site, providing the Internet-based trading facility, should contain information meant for investor protection such as rules and regulations affecting client broker relationship, arbitration rules, investor protection rules, etc. It should also provide and display prominently hyper link to the web site/page on the web site of the relevant stock exchange(s) displaying rules/ regulations/circulars. Ticker/quote/order book displayed on the web site of the broker should display the time stamp as well as the source of such information.
Order/trade confirmation: Order/trade confirmation should also be sent to the investor through e-mail.
Risk management: Exchanges must ensure that brokers have a system-based control on the trading limits of clients and exposures taken by clients. Brokers must set pre-defined limits on the exposure and turnover of each client. The broker’s system should be capable of assessing the risk of the client as soon as the order comes in. Reports on margin requirements, payment and delivery obligations, etc. should be informed to the client through the system.
Contract Notes must be issued to clients as per existing regulations, within 24 hours of the trade execution.
Cross trades : Brokers using Internet-based systems for routing client orders will not be allowed to cross trades of their clients with each other. All orders must be offered to the market for matching.
Enforcement: A separate working group has been set up to look into the surveillance and enforcement-related issues arising due to Internet-based securities trading. However, general anti-fraud provisions (Sebi Fraudulent and Unfair Trade Practices Regulations, 1995) will apply to all transactions involving securities or financial services, regardless of the medium.
|